Obama: ‘How do they justify this outrage?‘

WASHINGTON -- Joining a wave of public anger, President Barack Obama attacked insurance giant AIG for "recklessness and greed" yesterday and pledged to try to block it from giving its executives $165 million in bonuses after taking billions in federal bailout money.

"How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama asked. "This isn't just a matter of dollars and cents. It's about our fundamental values."

Fury was building as well on Capitol Hill, where Virginia 7th District Rep. Eric I. Cantor, the second-ranking member of the House Republican leadership, said in a statement that "Rewarding senior executives who created this mess is nothing short of an outrage."

And New York Attorney General Andrew Cuomo told AIG he wanted immediately a list of employees set to receive the bonuses. When it missed his late-afternoon deadline, he issued subpoenas.

Cuomo said his office will investigate whether the employees were involved in the company's near collapse and whether the bonus payments were fraudulent under state law.

Obama aggressively joined in the criticism of American International Group. The bonuses could make it tougher for Obama to ask Congress for more bailout help and jeopardize other parts of the recovery agenda.

The president had scheduled a speech yesterday to announce help for small businesses. But first, he said, he had a few words to say about AIG.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said.

He said he had directed Treasury Secretary Timothy Geithner to "pursue every legal avenue to block these bonuses and make the American taxpayer whole."

White House spokesman Robert Gibbs said later the administration would modify the terms of a pending $30 billion installment for AIG.

"This is just the kind of issue that galvanizes public outrage," said Paul C. Light, professor of public service at New York University. "They don't know the first thing about credit default swaps. But they do know about bonuses. And it's just the sort of thing that will undermine any future bailout activity."

Bailout steps for AIG totaling more than $170 billion since September effectively have left the federal government with an 80 percent stake in the company. Federal officials moved to save it last fall because they thought its failure would take down the global financial system, since AIG insures the assets of so many major financial institutions.

Pressure was building on the government to rework the AIG bailout to make sure taxpayers are repaid as much of the $170 billion as possible.

So far, the company has been honoring its contracts with U.S. and foreign banks, paying out more than $90 billion in economic-bailout funds to big banks and others. The government agreed to uphold those contracts when it seized control of AIG in September.

Some of the contracts were with firms that had received their own multibillion-dollar government bailouts.

Outcries came from congressional leaders.

"I call upon the executives at AIG to right the wrong they have done to American taxpayers," House Speaker Nancy Pelosi, D-Calif., said yesterday.

Senate Minority Leader Mitch McConnell, R-Ky., called the bonuses "appalling" and said he hoped "the administration gets the message from the taxpayers on this issue."

Virginia's Cantor said, "From the start, Republicans made clear that one of our biggest concerns . . . is the stunning lack of accountability to the taxpayers."

Virginia Rep. Tom Perriello, D-5th, signed a letter to Treasury Secretary Geithner demanding the administration block the AIG bonus payments.

Equating AIG to the auto companies that received government bailout checks, Perriello criticized it for hiding "behind contractual obligations" in paying its bonuses.

"Why is it OK for companies to force cuts on workers but not scale back million-dollar bonuses for the executives who knowingly caused us this mess?" Perriello said.

Democratic Sen. Jim Webb, in a statement, called AIG "out of line."

Neil H. Simon of Media General News Service contributed to this report.